Facing the new Facebook reality: The numbers behind the fright

Consider it the sigh heard round the world. As yet another Facebook announcement of algorithmic change consumed the web, those publishing execs who manage the biggest news sites’ digital audiences could only smile, nod and, do the usual: start crunching the numbers.

Facebook, by golly, was again tweaking – which should come as little surprise to those who have actually followed what Facebook CEO Mark Zuckerberg, has said: ”We view our work as only 1 percent finished. ”

While that sounds like hyperbole, put it in a time capsule, and I’m sure he’ll proven right, within a decade or so.

Why does Facebook keep changing? It’s convenient to think of Facebook in the guise of engineers Gilfoyle and Dinesh from HBO’s Silicon Valley, guys who might make these changes just to screw with publishers. Or, to riff off the “rigged” metaphors of this political moment, we can understand the changes as Facebook just continually resetting the rulebook to favor some and disfavor others.

In fact, the primarily aim of every Facebook change is to increase time spent on the site. More time, more money. Consider its problem: How does it possibly maintain, or increase, eating up as much as 10 hours, on average, of its users’ time each month?

Consider the impact of Facebook’s recent “Friends over News” change par for the course. For publishers, it’s all collateral damage, and sometimes collateral benefit. Hey, sorry, we hit your bumper; we’re in a big hurry. And, yet for beleaguered publishers, it’s so emotional.

While a few publishers may cite a traffic loss due to the Facebook change, most say it’s way too early to recognize a pattern, especially given that its first week included the Fourth of July holiday. That said, they don’t underplay the big business of Facebook management.

Bernard is one of the captains on the newer battleground of fighting for digital readers. They are the ones – at publishing companies across the country – doing the intel gathering, the number crunching and the platform divining so now central to publishers’ fortunes.

In this new tweak to its News Feed, Facebook says it is providing greater priority to what your friends share than to what publishers themselves share on Facebook. “Friends and family come first,” explained the overly social giant.

Yet, what does that mean? It’s far from an easy-to-understand proposition, and of course, Facebook doesn’t offer publishers much of a view into one of the world’s most curious black boxes.

Still, the tweak – and the reaction to it – tells us reams about how publishers, in fact, now adjust to the rising place of Facebook in their readers’ lives. Publishers’ calculations weigh these Facebook changes alongside the newer, and older, value of Google’s own driving of traffic to their websites. There’s a new maturity, here, among top publishers as they learn to work a permanently changing landscape.

Though much of the early reaction to this Facebook change, and those that preceded it, focus on “traffic”, and how many clicks the company will send publishers, the audience execs will tell you it’s far more complicated. It’s not traffic they want; it’s more engaged readers. And, in that the math of Facebook, and Google, traffic referrals gets a lot more complicated

Make no mistake, Facebook and Google now dominate the “referral” business. Just as the two have formed an effective duopoly in the digital advertising business, which I first noted as a growing phenomenon four years ago [“The Newsonomics of Google’s (Ad) Singularity”), the twin behemoths now account for 75% of all the referrals major news and entertainment sites now receive, says Andrew Montalenti, CTO of Parsely. Parsely is one of the biggest counters out there, providing a big-picture view from a U.S.-centric group of 170 media companies, running 700 of the higher trafficked sites.

As in digital advertising, Google has maintained its huge importance in traffic driving. Yet, as in digital advertising, it is Facebook that amazes with its hyper-growth. Just four years ago, says Montalenti, Google referrals outnumbered Facebook’s more than three to one.. Google drove 40% of all publishers’ referrals; Facebook drove 12%. In total, then, the two drove 52% of publishers’ referrals.

Two years later, it had become 32% Google, and 22% Facebook. By 2015, they were basically neck and neck, with Facebook generating 38% and Google 35%. Today, Facebook drives about 40% of all referrals and Google drives about 35%.

Together then, they drive 75% of all referrals to news and entertainment sites. Google has plateaued and Facebook shows continuing, if slowing, share-of-referrals growth.

Then, there’s the additional question of “dark Facebook”, all the traffic that Facebook Messenger may generate, but not be easily traced to Facebook. Mobile messaging of links, via Messenger, What’s App and other platforms, is harder to detect in terms of source. Similarly, referrals from publishers’ own email newsletters – a growing trade, as I’ve documented – complicate counting.

Ask most publishers – few of whom are willing to share their own data publicly due to endangering Facebook relationships – and they’ll tell you no more than a quarter or third of their monthly unique visitors come directly to their own sites or apps. Yes, those are the most loyal, habituated and engaged readers – and drive more than 85% of the digital money-making.

However, to put it simply, there’s not enough of them to sustain higher-quality, news-originating businesses. So, the management of “referrals” is becoming a higher art. That’s where all those analytics teams and highly sought after data scientists come in.

Recall the rise of the ugly word “platisher” a couple of years ago, and the attendant fears that “the platforms” would replace readers reading news on publishers’ own sites and apps? While that worry isn’t over, it’s subsided – like much of the rest of the high emotion brought to this rather mundane business of audience development and management. Put the platisher fear right on the shelf with Googlezon, Yahoo domination and Microsoft’s early forays in publishing. It’s real, but not publishers’ biggest problem. It’s not an existential issue; the shaky business model of all news publishing provides that all by itself.

Parsing this change

Call it the 2% shift. That’s hardly a seismic number, but it is about the impact that most publishers’ arithmetic forecasts, as they look into their Facebook crystal balls. Publishers believe they may lose one to three percent of their overall traffic, if the Facebook News Feed plays out as they think it will.

How do we get to that number?

Facebook supplies 15-45% of many publishers’ traffic. Newer brands – Vox Media, Buzzfeed, Vice – tend to get a greater percentage. Legacy brands like the Journal, New York Times and regional dailies tend to get less. (The harder the paywall, the less the Facebook traffic, which can amount to less than 10% for some sites.)

Publishers believes they may lose 5-10% of Facebook referrals. Most believe the lower number is about right. So at five percent plus loss, that’s a loss of about two percent of overall traffic.

That number, though, gets more interesting. If publishers lose two percent of traffic, will they lose two percent of their digital revenue? No.

Figure that for every two points of traffic, on average, publishers will lose one point of digital ad revenue, say the half dozen, wide-ranging publishers with whom I talked.

Why? Facebook overwhelmingly delivers mobile traffic – and that still fetches lower ad rates than desktop usage. Further, few sites are “sold out,” meaning that a minor drop in traffic – and “ad inventory” – doesn’t produce a one-to-one loss in revenue. Finally – and here’s where it gets most interesting, it’s a “quality of audience” question.

While publishers love all the newbies Facebook provides them, few of them will become regular readers on the sites they land on. Increasingly, news sites’ advertisers value those sites’ most engaged readers – not just big traffic numbers – so those “extra” new visitors actually offer relatively less value to publishers.

Add it all up, and this new Facebook change might mean a one percent change in digital ad revenue annually. For the New York Times, for instance, in its march toward a 2020 goal of doubling digital revenue, that’s a current hit of about $2M a year. It hurts a little – but it’s not a game changer.

There, even the most analytics-advanced publishers will tell you that it’s near-impossible to connect all the dots between Facebook referral and the sale of a digital subscription. Further, there too, that quality of audience question applies. The average Facebook referral a publisher receives won’t likely lead to a subscription, anyhow.

It’s going to take repeated referrals – and landings on a publisher page – to open even the possibility of subscription, and this one tweak in Facebook’s feed won’t change that a great deal.

What if the traffic impact is greater than anticipated? Then, the news execs can pull the lever of price. "If we don't think our audience scale is going to grow as much as we think, maybe we focus a little bit more on increasing price by 5, 10 percent," says one publisher.

So what then are publishers looking to count, as they track whatever changes they can see?

First, they are trying to figure out how Facebook will treat two different kinds of publisher links. They suspect that their own publisher pages on Facebook will see whatever traffic loss they experience. That would mean that Facebook becomes less of an alternative printing press for publishers.

On the other hand, they expect – but aren’t sure – that when Facebook users share story links themselves, that sharing will receive good Facebook ranking. Will a sharing on Washington Post traffic link – one key to the Post’s huge traffic increase over the past two years (“Is The Washington Post closing in on the Times?”) -- be treated the same way that a sharing of a kids’ photo is treated? Maybe exactly the same; maybe given a little less priority, they wonder. There’s a full-circle irony if sharing – Facebook’s original raison d’etre – should re-emerge here to determine news company treatment.

If that sharing/publisher page dichotomy is true, then the arithmetic can kick in. Some news sites derive as 75 percent of their traffic from users’ sharing links, while others’ find the opposite with their publisher pages driving 75%.

Then, they’ll re-look at one-year-old Instant Articles – one of Facebook’s big forays. Most publishers are underwhelmed by Instant Articles’ impact so far, but will continue to assess it in light of the News Feed change.

Finally, there’s Facebook’s own paid placement – as publishers buy preferential mentioning, “advertising” their content. For some publishers, paid placement — or Facebook Boost -- provides 20% of all their Facebook referrals. Says one publisher, “I suspect that one by-product of this change is that Facebook will more actively sell paid placement to publishers.” That wouldn’t be surprising – even if it is but a by-product, not a prime goal, of the feed change.

Says one top practitioner of the audience trade, “Exploiting their commercial position is what monopolies do... and this is just another tweak to reduce organic reach which drives a push up in ad sales (and, yes, ‘improve the user engagement based on feedback,’ I get it, Facebook!). It might be interesting to calculate the increased cost to publishers if they were to replace their organic reach dial-down with paid posts in order to stand still [on traffic received].”

Can publishers really play the field?

Amid publisher concern, it’s always worth remembering: Facebook itself doesn’t yet know the limits of its potential. The 12-year-old company is part party line, part bulletin board, part deal-offerer, part friend and part news source. If its metrics show that the recent tweak disappoints news-seeking readers, expect the company to reverse course.

"If Facebook users want news, Facebook will deliver it to them," says Jim Bernard, the (Minneapolis) Star Tribune’s senior vice president for digital and a leading audience exec in the regional daily business.

As Mark Zuckerberg and Facebook COO Sheryl Sandberg make new forays here and there, those initiatives will inevitably affect news companies. From the birth of Instant Articles to the lure of new dollars from Facebook Live to algo gyrations, Facebook’s many moves force rapid publisher assessment and reaction.

In that recognition – and their twin seeing of Google’s immense power in that same light – publishers would like to see the social/search monopolies as supplemental sources of business. They love the largely free help of Google and Facebook in helping new readers, especially Millennials, “discover” them, whether they are the New York Times or Vox. Yet, the math of their businesses means that “supplemental” is but a wish. Consider Facebook and Google central to their fortunes for growing their digital businesses and audiences.

What’s the right adjective then, if not supplemental? One exec says “critical,” given Facebook’s great reach. All agree, though, its best to hedge whenever possible.

“This is what I kind of like try to push all the time,” says another digital news start-up exec. “We have got to be thoughtful about ... not relying on any one platform. You can't be relying on friends, you can't be relying on radio, you can't be relying on anything. If YouTube changes it plans, you go somewhere else, and the same for Facebook.”

Parsely’s Andrew Montalenti calls it ““traffic source diversity” and further explains that thinking and the impact of the Facebook change in a Thursday blog post.

The audience execs put this Facebook change in the much larger landscape of digital reader behavior. After great explosions first in new audience coming online and then in mobile news usage, there’s a certain sense of maturation in the marketplace. What that means to them is clear, and best summed up by Atlantic Media President Michael Finnegan (“What Are They Thinking: “Atlantic Media floods the zone”): "I think the level of effort to achieve growth on owned and operated properties is growing."